Ford May Take $500-Million Charge
WASHINGTON — Ford Motor Co. disclosed Tuesday that it may take a charge of up to $500 million against 1989 earnings because it sold its Rouge Steel Co. subsidiary for less than book value.
In a filing with the Securities and Exchange Commission, Ford also said it is projecting North American production for the first quarter of 1990 to be off 25% from the same period in 1989, following a 13% decline in the quarter just ended.
Ford also said it would increase borrowings “substantially” this year because of two recent acquisitions.
The disclosures came in a filing by a wholly owned Ford subsidiary, Ford Motor Credit Co., seeking SEC permission to offer $2 billion in debt securities from time to time over the next two years.
Ford Motor Credit provides wholesale financing and capital loans to franchised Ford dealers and makes loans to vehicle leasing companies.
As part of the SEC’s required disclosure to potential investors, the registration filing revealed several situations at the parent company:
- Ford’s Dec. 15, 1989, sale of all the outstanding stock of Rouge Steel Co. to Marico Acquisition Corp. “was below book value. The amount of the charge to net income has not yet been determined, but could range up to $500 million for the fourth quarter and full year 1989.”
- Marico was merged into Rouge Steel and Ford acquired 20% in the resulting corporation but also is committed to indemnify Rouge Steel for “environmental matters” prior to the sale. “Ford is unable at this time to determine the amount of its potential responsibility for such environmental matters; however, such costs could be substantial.”
- On Jan. 12, Ford announced plans to sell Ford Aerospace but “it is uncertain when, or at what price, such sale may occur.”
- The acquisition of Associates, a major consumer loan concern, and Jaguar PLC, the British luxury car maker, “have used and will continue to use substantial amounts of available cash. Consequently, it is anticipated that Ford and its affiliates will substantially increase borrowings in 1990.”
- Ford estimated its North American vehicle production in the fourth quarter of 1989 was “13% below the fourth quarter of 1988.”
